Americans Face Retirement Savings Regrets Amid Two-Pronged Crisis

When asked for their most common financial regret, Americans yet again pointed to a lack of retirement savings as the top pick.

For the third consecutive year, “not saving for retirement early enough” led consumer financial firm Bankrate’s list of money regrets, with 18% of respondents selecting that option as their number-one choice. Not saving for emergency expenses followed closely behind with 14%, followed by taking on too much credit card debt in third place at 10%.

Bankrate cited data from the Center for Retirement Research (CRR) at Boston College, which recently found that half of all working adults believe they won’t be able to maintain their standard of living in retirement — along with Federal Reserve reporting showing that only half of middle-class Americans have any kind of retirement account, with median balance of $25,000.

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“The figures are even more scary if you look at households helmed by someone between the ages of 55 and 64, or the decade before retirement,” Bankrate notes in its analysis of the survey results.

Among that group, just 60% have saved for retirement and have a median balance of $120,000 — far below the 11 times’ final salary that many financial planners recommend.

And even those who said they regret not saving for retirement earlier aren’t necessarily taking action: A quarter of respondents who said they had any kind of financial regret reported having no plans to remedy the situation, with less than half — or 49% — saying they were already dealing with the problem. About 6% said they’d tackle the issue in more than a year, with just 19% saying they’d look into fixing it within the current year.

The grim retirement statistics form what Bankrate calls a pair of “savings crises” affecting American households, with both long- and short-term problems. Not only are Americans not prepared for retirement, the firm points out, but they have an average of less than $4,000 available in savings — well below the $23,000 that they’d likely need to pay for six months’ worth of expenses amid an unexpected emergency.

Bankrate recommends that Americans of all ages get out of the habit of putting specific dollar figures on amounts they should be both spending and saving, with an emphasis on percentages that more accurately reflect their earning and spending trends.

“Get used to saving 10% of your pay in an employer-sponsored 401(k) including any match, or in an IRA,” the company concludes. “You’ll have less to regret later in life.”

Written by Alex Spanko

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  • Reading this article by Alex is sad. I reflect over the years at me and my wife’s life, I wish we would have done better than we did in our retirement planning.

    However, I realize we are probably in better shape than many seniors of today but not as good as we should be!

    So many baby boomers in there younger years was thinking of everything else other than retirement. I know it hit us a bolt of lightning coming out of the sky, we then started to take action, I guess better late than never!

    I find close to my 21 years in the reverse mortgage space, so many seniors were not and are not prepared for retirement as the article spells out, especially in the event of death of one of the spouses. This becomes more critical if one is still working and bringing in an income they are are both counting on for living expenses!

    What is expressed in this article is sad but yet so true. I am not saying what I am about to say to be this great sales advocate but we all have the opportunity to help a lot of seniors with their retirement woes!

    I don’t look at our product as a last resort pool of funds and a bail out anymore, on the contrary. I look at our product in helping seniors in so many other ways now.

    Today more than ever, the HECM is a retirement tool to be used by many, many seniors. I don”t care if it is to pay off an existing mortgage and pay off other debt or taking a monthly tenure disbursement for life. Either one of these are increasing the cash flow coming into those seniors monthly budget! In short, increasing the amount of money monthly coming in to aid in improving the quality of their lives!

    Don’t get me wrong, I am not discounting the importance of the line of credit for future use for increased cash flow, emergencies and more. Nor am I discounting the advantages to help in retirement planning by taking a certain amount of cash at closing.

    What I am saying is that the HECM comes into play more today than ever in changing the statistics spelled out in Alex’s article to the positive rather than a negative!

    John A. Smaldone
    http://www.hanover-financial.com

  • We are a credit society. Is it just that the indulgences of older generations impact the finances of the younger? To some degree the Baby Boomers saw the best years financially of their parents without experiencing their misery during the Great Depression. Baby Boomers gained a warped sense of values believing they owed their children what they were given and more.

    To some degree our indulgences have included providing our children with only the best. From tennis shoes to commencement and all of the pomp and circumstance that goes with it, we have indulged ourselves through our children. This is not new but the extent of it is.

    One thing that is quietly being acknowledged in the HECM industry is that the losses from HECMs in the MMIF are potentially the responsibility of the borrowers in the MMIF forward mortgage programs. As more of these borrowers who have had a forward MMIF mortgage on or before 10/1/2009 pay off their mortgages, the high cost of their MIP from the years that HECMs have been part of the MMIF will never be recovered unless retroactively at some time in the future which is very doubtful.

    What is so horrible about this situation is that borrowers who are generally less economically advantaged are overpaying on their MIP just to cover HECM losses. While $1.7 billion came from the US Treasury, i.e., taxpayers generally, at the end of fiscal 2013, the current $14.5 billion loss and the $1.5 billion HECM shortage on its portion of the 2% required MMIF reserve, the non-HECM programs and their borrowers are now potentially on the hook for $16 billion. Currently the reserves of the other programs are sufficient to cover these shortages but is it fair that the current line of “defense” for HECM losses are less privileged mortgagors?

    For those who may not be aware of it, all losses incurred in the MMIF programs must first be absorbed by the other MMIF programs, then by the US Treasury. This is why the HUD Secretary is not currently going to the US Treasury for $16 billion for the HECM program. At the only time that HUD did this in fiscal 2013, the overall MMIF reserves were a negative $1.7 billion. If former FHA Commissioner Galante had not transferred $6.546 billion out of other MMIF program reserves in fiscal 2013 and prior, the cumulative loss would have been shown as coming from the HECM program.

  • I agree with John below, it’s very distressful and sad to read this article. So many of our seniors are in the same situation. Essentially house rich and cash poor, living check to check on pension and social security. Making the Reverse Mortgage Program so vital to a retirement security and the enjoyment of living out your golden years. Which makes it even harder when HUD reduces the PLF on our seniors who could really use as much of their equity from this home as possible.

    The October 2nd changes of last year were detrimental to this effort. When a 71 year young senior can only extract less than 50% of their equity its a travesty. This program is not a welfare program. Rather it’s hard earned equity built up over the years in hard working Americans homes. Now, at the time of retirement when they most need their homes to pay them back, they are restricted to a much lower amount of their own equity, at a much higher cost to those wanting to take advantage of this great program!

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